Did Hedge Funds Drop The Ball On Instructure, Inc. (INST) ?

Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Instructure, Inc. (NYSE:INST).

Instructure, Inc. (NYSE:INST) was in 17 hedge funds’ portfolios at the end of September. INST shareholders have witnessed a decrease in support from the world’s most elite money managers of late. There were 21 hedge funds in our database with INST positions at the end of the previous quarter. Our calculations also showed that INST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most investors, hedge funds are perceived as unimportant, outdated investment tools of the past. While there are over 8000 funds with their doors open at present, Our researchers hone in on the aristocrats of this group, about 750 funds. Most estimates calculate that this group of people handle the lion’s share of the hedge fund industry’s total capital, and by tracking their matchless stock picks, Insider Monkey has figured out various investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Kevin Oram Praesidium Investment Management

Kevin Oram of Praesidium Investment Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the latest hedge fund action surrounding Instructure, Inc. (NYSE:INST).

Hedge fund activity in Instructure, Inc. (NYSE:INST)

Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in INST over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Foxhaven Asset Management was the largest shareholder of Instructure, Inc. (NYSE:INST), with a stake worth $106.2 million reported as of the end of September. Trailing Foxhaven Asset Management was Praesidium Investment Management, which amassed a stake valued at $105.8 million. Nine Ten Partners, Rivulet Capital, and Skye Global Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Nine Ten Partners allocated the biggest weight to Instructure, Inc. (NYSE:INST), around 32.43% of its 13F portfolio. Inherent Group is also relatively very bullish on the stock, earmarking 16.24 percent of its 13F equity portfolio to INST.

Since Instructure, Inc. (NYSE:INST) has experienced declining sentiment from hedge fund managers, logic holds that there lies a certain “tier” of hedgies who sold off their full holdings by the end of the third quarter. Interestingly, Steve Cohen’s Point72 Asset Management said goodbye to the largest investment of the “upper crust” of funds watched by Insider Monkey, worth close to $12.4 million in stock, and Andrew Bellas’s General Equity Partners was right behind this move, as the fund said goodbye to about $11.2 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 4 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Instructure, Inc. (NYSE:INST). We will take a look at Akcea Therapeutics, Inc. (NASDAQ:AKCA), Kronos Worldwide, Inc. (NYSE:KRO), Sonos, Inc. (NASDAQ:SONO), and The Liberty Braves Group (NASDAQ:BATRA). This group of stocks’ market valuations match INST’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AKCA 4 4811 -4
KRO 9 32162 -3
SONO 27 100751 6
BATRA 9 68616 0
Average 12.25 51585 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $522 million in INST’s case. Sonos, Inc. (NASDAQ:SONO) is the most popular stock in this table. On the other hand Akcea Therapeutics, Inc. (NASDAQ:AKCA) is the least popular one with only 4 bullish hedge fund positions. Instructure, Inc. (NYSE:INST) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on INST as the stock returned 37.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.